Channel partner agreements are revenue-facing contracts with a big impact. How can you negotiate them more smoothly?
This deep dive looks at what a channel partner agreement is, who it affects, and why and how it’s typically negotiated. Use the navigation below to find out more, or explore our deep dives on other contracts, like NDAs and SaaS agreements.
What’s a channel partner agreement? | Who do they affect? | How to approach channel partner agreement negotiations | How to negotiate channel partner agreements more easily | Useful features | Learn more
What’s a channel partner agreement?
In a channel partner agreement, two businesses set out and agree the terms of their commercial partnership. An example of a channel partner agreement is the contract between two SaaS companies, whereby one agrees to include the other in its marketplace or to provide referral traffic that could lead to revenue, in exchange for a percentage of that revenue.
This kind of contract is extremely common in technology and SaaS in particular. Many businesses derive a significant portion of their revenue from partnerships like the Salesforce AppExchange, the Slack app directory, or review sites like Capterra and G2. The purpose of channel partner agreements is to codify the revenue relationship between the two parties.
Who do channel partner agreements affect?
Channel partner agreements can be crucial to a company’s revenue and growth. Because of this, they can affect lots of stakeholders across the business:
Legal counsel. There’s typically asymmetry in channel partner agreements, and the obligations they create – in terms of revenue but also data use – can have long-lasting impacts. Because of this, the in-house legal team will usually own and manage channel partner agreements.
Finance. The commercial terms set out in channel partner agreements can have a big effect on financials and forecasting, so the finance and revenue operations teams will want to be in the loop when it comes to headline terms.
Sales. Channel partner agreements might concern various sales roles – from partnerships managers who look after channel partner relationships, to sales operations who might need to input, to the individual salespeople who take forward the leads that arrive through the channel.
Marketing. If a channel partnership is a key distribution channel for the business, the marketing team will want sight of their obligations and responsibilities when it comes to promotion, revenue sharing, and so on.
The channel partner is also a key stakeholder, of course, as is the company’s authorized signatory, who signs on behalf of the business. In SaaS companies and marketplaces the authorized signatory is often still the CEO.
Channel partner agreements can create tension between legal teams looking to mitigate risk and partnerships managers who want to open up new revenue streams and close deals quickly
How to approach channel partner agreement negotiations
The degree to which channel partner agreements will be negotiated will vary. If you’re a platform that has partnerships with hundreds or even thousands of smaller vendors, it’s possible that you’ll allow no negotiation at all. On the other hand, if the growth of your large SaaS business is facilitated by the core functionality of another SaaS business, then the channel partner agreement between the two companies might be worth hundreds of millions and so heavily negotiated.
Agreements at the lower end of the spectrum are the most suitable for negotiation using contract collaboration tools as they need to move quickly and without friction.
Commercial strategy, legal risk, and the power balance between the two partners will all define the degree to which you’re prepared to negotiate channel partner agreements. Some of the most frequently negotiated terms are:
The process for revenue sharing and its frequency
The effective term and renewal mechanism
The mechanics of termination
Data use and data protection provisions
It’s unlikely that you’ll be able to avoid negotiating channel partner agreements altogether. And remember that these agreements can also create tension between legal teams who are looking to mitigate risk, and partnerships managers who want to open up new revenue streams and close deals quickly. Decisions need to be taken collaboratively. Make sure your contract collaboration platform has features that will allow you to make changes and progress deals quickly.
How to make channel partner agreement negotiation easier
Remember the purpose
A channel partnership is a compromise that should ultimately bring in revenue for both parties. Negotiations over percentages of deals or cost per lead can be fraught and time-consuming. But keep your eyes on the prize: if the agreement leads to a commercial relationship that works for both sides, it could drive business growth for years to come. It’s hard not to sweat the small stuff – but try!
Prepare and codify your fallback positions
You might be willing to soften terms above a certain contract value, and you might want to stand firm below it. To give your partnerships team greater confidence and certainty, legal counsel can codify those fallback positions in a playbook or bake them into the template in a contract collaboration platform by using conditional logic. Commercial teams will be able to self-serve on negotiation, without calling on legal every time.
If you’re moving between Word, email, shared drives and DocuSign, you’ll lose your negotiation data and the audit trail of who did what, when
Stay in one system
If you’re moving between Word, email, shared drives and DocuSign, you’ll lose negotiation data and you’ll lose the audit trail of who did what, when. Choose a contract collaboration platform that lets you negotiate in-browser, so all your data is captured and searchable both during and after the negotiation process.
Check out the ‘Modern contract handbook’, in which experts explore every stage of the contract lifecycle.
Useful features for negotiating channel partner agreements
Negotiations will run faster and more smoothly if your contract collaboration platform has some or all of the following features:
Internal and external commenting, so that internal colleagues and external counterparties can see, make and track changes to the contract.
Visual timeline, so that you can see when counterparties have viewed the contract and address any hold-ups.
Audit history, so that you can easily compare different versions during negotiations.
Two-way CRM integration, so that any changes to the agreement are reflected in your systems of record for sales and contracts.
Integration with Slack and email, so that parties can be notified as negotiation happens.
Analytics, so that bottlenecks can be identified quickly.
Conditional logic, so you can easily swap out related clauses if key details change.
Word import/export, so that if one party won’t negotiate in-browser and makes changes in Word instead, you can reconcile versions easily. This can happen with channel partner agreements when there’s asymmetry between the contract parties; it’s good to have the option!
If your contract workflow is supercharged with all these features, both companies will find it easier to negotiate channel partner agreements – hopefully leading to a faster signature and better outcomes for all involved.
Is negotiating channel partner agreements a pain point for your business? Is your SaaS company or marketplace growing so fast that the contract process is out of control, with friction pre-signature and a lack of visibility post-signature?
If so, collaborate with Juro and see if you could benefit from a contract collaboration platform that enables businesses to agree and manage contracts all in one unified workspace.